Customer retention fantasy land

FASTER THAN A speeding Moped, more powerful than a 60W bulb, able to leap small children in a single bound it's me, Market Man! OK, maybe it takes me two leaps, but children are growing bigger these days. Have you looked at the size of these things they're calling kindergartners? It's like they've all been eating their Wheaties, or else there's something in everyone's water but mine! Enough about

FASTER THAN A speeding Moped, more powerful than a 60W bulb, able to leap small children in a single bound … it's me, Market Man!

OK, maybe it takes me two leaps, but children are growing bigger these days. Have you looked at the size of these things they're calling kindergartners? It's like they've all been eating their Wheaties, or else there's something in everyone's water but mine!

Enough about me and my delusions of vertical grandeur. Let's talk about the fantasy world in which you've been living. You know, the one where you provide someone a service once and then think that makes them a customer. Or the one where your service and expertise is so amazing that customers remember your name and number with total recall, never visit the Yellow Pages again, and refer you endlessly to friends, family and neighbors.

That's the sort of LaLa land that will put you straight out of business and into the unemployment line. In the real world, it's your responsibility to remind customers that you exist and that you provided an exemplary service. And if they forget you, guess whose fault it is? Bingo. Not theirs.

So, who are your customers?

Calls from returning customers don't automatically come. In fact, quite a few of the ones you rushed out to see on a cold winter (or warm summer) day for an emergency repair don't even remember your name. So, how could you expect them to remember that they're your customer? When they need a contractor again, they'll probably be flipping through the Yellow Pages — starting the process all over.

Now, don't be offended that customers are so fickle. Instead, you'd be much better off recognizing that human nature and sound marketing practices can work together to keep your customer files filled with active customers.

So first, let's clarify why your customers would lose interest in your company anyway. According to a survey of 9,000 paying customers, customers leave for any of the following reasons:

  • 4% said your pricing was unfair;
  • 9% died or moved away;
  • 12% had an unresolved complaint;
  • 16% took a competitor's offer; and
  • 55% left due to your "indifference" — this just means they didn't think you cared!

The second reason is the only one you can't do anything about. And, the last two figures actually relate to the same reason: 71% left because you weren't there, but your competition was.

Customers value relationships with their vendors. In fact:

  • 37% said the relationship was the most important reason they bought;
  • 22% said it was because they owned another product of yours; and
  • 14% were referred by a friend or family member.

Add those up, and 73% of your business has some relationship tie-in.

So, now you know two key points. Customers leave because you aren't there for them, and they're looking for a relationship.

But here's where these issues get further complicated. Contractors typically spend up to 80% of their marketing money going after people with whom they have little or no relationship (Yellow Pages are the best example). Yet, if they would redirect a portion into effective retention marketing, they could transform their contracting business.

The simple fact is this: Contact is the way to keep customers. And, "contact" isn't some kind of big marketing mystery. It's easy things, such as follow-up phone calls after repair or service calls, thank you letters, holiday cards and customer newsletters.

That last example, the customer newsletter, is the crown jewel of retention marketing. They're simple to use, quick and customers keep them around.

Your newsletters should have information that is not solely about the plumbing business. This is because you must — repeat "must" — retain customers' interest and 2,500 words on sump pumps will not do it. In order to be effective and interesting, maintain a 60/40 split of "general interest" to "specific field interest" in your editorial split. Call, e-mail or fax us for a free sample.

The best newsletter campaigns give customers rich, interesting information that helps customers run their households safely and cost efficiently. Plus, they bring your company name and logo right into your customers' homes. It keeps them informed about new products and services while proving customer benefits. Best of all, it's not perceived as "advertising" and thus forges a far better image and strengthens the relationship. A better relationship equals better retention.

One other important note: You've already paid to get these customers. Studies show that it costs you $275 to $325 to get a customer. Yet, a good customer retention newsletter only costs about $3 a year including postage for four issues. It doesn't take a financial genius to see that retention marketing is far less costly than acquisition marketing – and just as important.

What's your investment and the payoff in customer retention?

A customer retention campaign investment will range from a minimum of 6% to 8% of your total marketing budget. You should send newsletters between two and four times per year to every customer who has written you a check in the last 48 months. That's a paltry expense when you consider all you've just read. But for you fence-sitters, look at these figures:

  • Loyal customers spend 33% more than non-loyal;
  • Referrals among loyal customers are 107% greater than non-loyal; and
  • Rate of referral is highest when closest to the point of contact.

The fact is your company's current customers are the absolute No. 1 source of your future sales. When you lose customers through neglect, you lose all their future business and all their referrals to your competition. When you keep customers by maintaining regular contact, you keep that pool of sales for yourself. So get your head out of the clouds and go keep some customers – before your competition beats you to it.

Adams Hudson is president of Hudson, Ink, a creative marketing firm for contractors. You can get a free sample of a customer retention newsletter by faxing your polite request to 334/262-1115 or by calling 800/489-9099. You also can visit www.hudsonink.com for other free marketing articles and reports.

TAGS: Marketing